How long does GFOA recommend contracts for actuarial valuations should typically last?

The Government Finance Officers Association (GFOA) recommends that contracts for actuarial valuations typically last for five years. This duration allows for a balance of stability and flexibility in engaging actuaries. A five-year period enables the organization to benefit from the actuary's ongoing understanding of its specific financial context and actuarial practices, while also incorporating regular updates and assessments of changing circumstances, such as demographic shifts, funding needs, and regulatory changes. By opting for a five-year contract, organizations can ensure continuity in their actuarial services while fostering a relationship that can evolve in response to their needs and the broader financial landscape.

Shorter contract durations, such as one or three years, might not provide sufficient time for an actuary to fully engage with the complexities of the organization's finances. Conversely, a ten-year contract could limit the organization's ability to adapt should there be significant changes in its financial situation or in actuarial methodologies. The five-year term strikes an optimal balance between these considerations, making it the recommended choice by GFOA.